Major capital increase for Barita?

If one of the resolutions to be put to shareholders of Barita Investments at the upcoming Annual General Meeting set for March 21 is anything to go by, the company is set for some major changes.
According to the notice of meeting, shareholders are being asked, to approve a major increase in the authorized capital of the brokerage house, to 15 billion units up from 1 billion currently. The increase will result in the creation of 13.5 billion new ordinary shares and 500 Million preference shares.
The meeting is being asked to give Directors authority to dispose of the newly created shares in such manner as they think most beneficial to the Company. The company did not state the purpose of the added shares.
The company by the end of March, will be issuing new shares to existing shareholders, following the approval of a right issue, 10 new share for 17 existing ones at $15.50 each. The proceeds of the rights issue will take the issued capital up by 262.28 million units to 708 million shares. At this level the shares will not be very liquid and the company will need to split the stock to help improve liquidity.
The rights issue seems to be just one of a series of moves by the company to increase the number of issued shares. In 2018, IC suggested that the company was set to issue rights to existing shareholders as well as the likelihood of splitting the stock. The move to increase the authorised capital seems poised to fulfill the splitting of the stock. The odds favour a stock bonus that could well result in issued shares moving to between 2.1 billion and 2.8 billion units. Such a move would result in more liquidity for the closely held stock and not the most liquid on the market. A stock split that

Barita Investments shareholders seem poised to get a stock split sooner than later.

would use of just 2 billion of the increased share capital, suggests that there is much more to the move than the annual report speaks to. This publication is of the view that one or more major regional financial institutions are likely to buy into Barita well ahead of the final quarter of 2019. The move would result in Conerstone, the current major shareholders reducing their percentage holdings. Barita could well go back to the market to garner funds from a wider cross section of investors and thereby increasing the number of investors in the company.
At the end of December, Barita shareholder’s capital was $3.05 billion with total assets of $19 billion. The company reported profit of $108 million after foreign exchange and trading gains of $156 million up from a loss of $39 million in 2017.

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